Wednesday, October 19, 2005

What should I patent?

Patenting is great in that it helps a company protect its future revenue stream on an R&D investment. But patenting is hard because it is difficult to know what to patent. Sometimes companies just try to patent every idea. But this policy can’t always do an effective job at protecting the future revenue streams because it leaves holes for competitors, not to mention it can be a waste of patenting dollars.

In my opinion, it’s possible for companies to take a more focused approach to patenting. Starting with the market opportunity in question, ask: what are the key set of challenges any would-be competitor would be forced to solve if it wanted to enter this market? A company should patent its solution to the key challenges and obtain exclusive rights to all other solutions to the same key challenges.

For example, say a company wished to enter the digital photography market and address the consumer need for managing a growing collection of digital images. There are many technical challenges involved in addressing this consumer need. But a key challenge is with finding a specific photo a consumer wants to see from their collection. There are many potential solutions to this problem of photo retrieval. To protect future revenue in the market for managing photos, a company would be smart to build the must-have IP portfolio of the solutions to the photo retrieval problem. Would-be competitors would then be blocked from introducing new photo management systems since they would need the part that involves retrieving a specific photo.

To do this right, a company needs to figure out what are the key challenges and what are all the possible solutions. Knowing the key challenges is difficult because an engineering team is constantly faced with challenges, any one of which could seem to be key. It is critical to be able to see the forest from the trees and to look outside the company to learn what the most common problems are.

Likewise, identifying all possible solutions to the key challenge is difficult because different people create different solutions. Therefore, in addition to securing its rights to practice its own solution to the key challenges, a company should secure exclusive rights to different solutions. Exclusive rights can be obtained through mergers and acquisitions or through licensing.

However companies overcome identifying the key challenges and obtaining rights to practice all known solutions, doing so can allow a company to wrap an iron fist around the future revenue stream for a particular market. By contrast, the policy of trying to patent everything leaves holes in a portfolio. Sure, by increasing the number of patent applications, a company stands a better chance at obtaining a valuable patent. But it’s a game of chance. Also, it is cost-prohibitive to build a patent portfolio of all known solutions to a challenge. It would be much more effective to survey what are the key challenges, and to build a must-have patent portfolio around all known solutions to the key challenges.

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